Press Release
October 27, 2010


Senator Franklin Drilon on Tuesday defended the legality of Executive Order (EO) 7 which ordered the suspension of bonuses and allowances of the governing boards of state enterprises until year-end, saying that it was only proper for such to stop the bleeding of government coffers.

Drilon said that it was only proper for President Benigno Aquino III to issue the directive, adding that pending the approval of Congress of a proposed law that creates a new compensation scheme for state enterprises, the directors or trustees could have gone their merry-way and abused their prerogative in appropriating for themselves excessive perks.

"The governing boards of various GOCCs have abused their power even more and granted themselves obscene allowances if not for the executive order," said Drilon, chairman of the Senate Finance Committee that uncovered the widespread misuse of state funds by members of the governing boards of government-owned or controlled corporations (GOCCs).

"Without the EO, the abuses will continue unabated and public interest will continue to suffer," he added.

Drilon was reacting to a petition filed by Jelbert Galicto, a legal officer of Philippine Health Insurance Corp. in Butuan City, assailing the legality of EO 7 which should be declared "unconstitutional" as it he claimed it encroaches on the legislative power of setting pay scale for GOCCs.

The EO only covers the directors and trustees of GOCCs, Drilon stated.

While the directors or trustees of state enterprises have the power to fix the compensation of employees under their respective charters, Drilon, however, said that the governing boards should not have granted themselves unwarranted bonuses as Memorandum Order No. 20 issued by former President Gloria Macapagal-Arroyo in 2001 imposed as a ceiling on compensation on the heads of GOCCs an amount which is double the salary of their counterparts in the Cabinet.

Drilon, who also sponsored Senate Resolution No. 17 urging the President to issue an order which was the basis of the executive order, also authored Senate Bill 2566 or the GOCC Governance Act of 2010 as a result of the findings of the Senate Finance Committee of how rampant the abuses are and in an effort to regulate the operations of state firms and put a stop on the abuses of state funds.

The proposal seeks to establish a new remuneration system for directors, trustees and employees of GOCCs, which will be recommended by monitoring body to be known as the Governance Council for GOCCs. However, the ratio of compensation for those occupying higher ranks to those at the lower ranks should be maintained at equitable levels, giving due consideration to higher percentage of increases to lower level positions and lower percentage increases to higher level posts.

No exemptions will be made for state firms from the coverage of the new compensation scheme, and in no case shall there be any decrease in the salaries of incumbent employees of state-run enterprises who are covered by Republic Act 6758, as amended, upon the implementation of the Compensation and Position Classification System for state firms.

Drilon said an initial hearing is scheduled when session resumes on November 8.

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